Monday, September 27, 2010

Fairness For All... Except Working Taxpayers

As we await the outcome of Iain Duncan Smith's think-the-unthinkable welfare review, news reaches us from an acquaintance out in the country. A cleaner he knows:

"...met up with someone she knows well from schooldays locally and they exchanged the usual. What are you doing now? asks my contact. I'm on the sick, was the reply. What's wrong with you then? Oh it's my nerves she said, in fact I'm trying to get permanent disability now. How does that work? Well, you just shake a bit and cry and they believe you.

My indignant contact told me that this individual was on £275 per week, and was just off on a holiday in the Med, on what promised to be "a bit of a booze cruise". She is never, she said, going to work because she couldn't possibly get as much money working. Naturally it makes the cleaner, who grosses less than £275 for a week's cleaning, very angry indeed."

It makes Tyler very angry as well.

We've blogged the welfare disaster so often, you will be bored reading it. But here we go again.

The current level of welfare is set not by reference to what people need to survive, but by what they supposedly need to be "included" in society. It is described as a relative rather than an absolute definition of poverty - the more everyone else has, the poorer you must be, and the higher must be the level of welfare support you need.

Holidays are a case in point. Since "everyone else" now takes holidays, welfare has to provide the funding for the unwaged to take them too. Which is why we're paying for the cleaner's "sick" friend to take this booze cruise. Even though the cleaner herself has probably never ever done such a thing, and is rightly outraged.

The whole corrosive concept of relative poverty was dreamed up half a century ago by a bunch of left-wing academics here in Britain. Yes, I'm afraid Britain was responsible.

And when we say left-wing, we don't of course mean anyone like Bob Crow, whose views of injustice might arguably have been formed by direct experience of life in poverty. No, we mean the usual suspects - Hampstead sons of privilege whose principle knowlege of poverty came from reading Dickens (one of the prime movers was literally 27th in line to the throne and had presumably grown up dining off gold plates - interestingly, he was also homosexual, which at that time made him an outsider, and Teach-Yourself-Freud says he was merely following the Cambridge spies in undermining the society that he felt excluded and denigrated him).

As we know, these Hampstead types have absolutely no idea how people operate out in the real world. Their own lives have been shaped by family wealth and privilege, and they simply can't relate to the rest of us who have to scrabble for cash by fair means or foul. They have no grasp of the idea that changing the pattern of financial reward will inevitably change the pattern of behaviour.

Similarly, they have no idea how people beyond the servants' hall live their lives. For example, one of their first attempts to define relative deprivation asserted that you were deprived if you didn't have a cooked breakfast every day. Obviously in Hampstead they were used to devilled kidneys and kedgeree served up by cook on those outsized silver salvers, so they reckoned that was the norm. Needless to say, down on our estate (council estate that is) I can't recall anyone having a cooked breakfast, and we can't all have been deprived.

Anyway, that's all in the past, and the question is what can we do about it now? What must we change to ensure working people on low incomes do not get faced with acquaintances on the sick swanning off on booze cruises?

Ideally, we need to redefine the poverty line back to what most of us always thought it was in the first place - the money that you need to feed, clothe, and house yourself, but not the money you might like to spend on holidays and booze. If you want the extras, you have to work for them.

Unfortunately, there is at present no accepted definition of what exactly constitutes need. We have no standard for measuring the poverty line in absolute terms.

There is however one thing we do know. We know that the reason these Hampstead types devised the notion of relative poverty back in the early 60s was to solve a problem. It was a problem for the left, and it was simply that the never-had-it-so-good era of post-War growth had to all intents and purposes ended absolute poverty. The left had thereby been robbed of its strongest sales pitch, and desperately needed a new one. Relative poverty was that new pitch.

So suppose we do the following. Suppose we take the average income from that same period back in the early 60s, which we know was well above the absolute poverty level. And suppose we uprate it for inflation since then. What would that be in today's money?

Luckily we don't need to crunch the numbers for ourselves because the IFS has made available a handy spreadsheet containing their own calcs. And according to them, the median household income from 1961, adjusted for inflation, is equivalent in today's money to an income of £195 per week, or £10,140 pa*.

Which is very interesting.

For one thing, it is way below the £275 per week being handed out to our booze cruiser.

More fundamentally, it's under half today's median household income of £407 per week*. And as regular BOM readers will know, we have long argued for reducing the official definition of the poverty line from 60% of median income to 50% (eg see this blog). So a 50% poverty line would still leave welfare recipients better off than the average household in 1961.

Back then, a commitment to lift every welfare dependant above the living standard enjoyed by that year's median household would have been thought wildly generous. It would have been way above anything understood as poverty income.

So what's changed? The bundle of goods 1961's median income can buy today (adjusted for inflation) is still way above real poverty.

The only reason we even consider it might not be enough is because we somehow allowed those Hampstead socialists to persuade us that poverty is a relative concept.

It isn't.

And a system of welfare that has hard-working cleaners paying tax to fund welfare dependant booze cruises is something that shames us all.

We should never have allowed the left to build such a monster in the first place. We must not flinch now as it's rolled back. We owe it to that cleaner.

*Footnote - The IFS figures relate to 2008-09, which is the most recent year for which we have official stats. Also note that they are figures for "equivalised" income, which means the raw data on individual household incomes have been adjusted to allow for different types of household (how many adults, how many children, etc).

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Despite all the talk of cuts, government still consumes nearly half our national income. Yet many tens of billions of its spending is wasted, with taxpayers made to pick up the tab for a depressing array of overpriced sub-standard services. This is money we can no longer afford, and our National Debt is already at danger level.

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